Huge Gap Separates Formula One’s Rich From the Poor

MONTREAL — The top seven finishers of the Canadian Grand Prix over the weekend all race for the top four teams in Formula One. Those also happen to be the four teams that have signed lucrative deals to get tens of millions of dollars a season for simply showing up for races.

The last-place finishers in Sunday’s race all race for the poorest teams in the circuit. Not only do they lack the lucrative deals signed by the top four, but they are struggling so much financially that they have teetered on the edge of survival over the past few seasons.

The top four teams — Ferrari, Mercedes, Red Bull and Williams — enjoy an advantage with their special deals, though their deals are different. Ferrari — which finished second Sunday with Sebastian Vettel, and which is second over all this season — receives more than Mercedes, whose driver, Lewis Hamilton, won Sunday. Mercedes also leads this season’s standings and also won the series last year.

The top teams in Formula One are among the highest-rewarded in world sports, but the commercial structure of the series is among the most lopsided in sports, too. And much of the talk leading up to Sunday’s race was about the unequal financial situation in the circuit.

The talk began last Thursday after the beer company Heineken announced it was signing on as a major sponsor. Heineken would not say how much the deal was worth but said it represented about 10 percent of its marketing budget for a company that reported more than $23 billion in revenues last year. With Heineken spending an estimated $70 million a year to sponsor soccer’s Champions League, the deal is likely to be a lucrative one for Formula One.

“We are in Formula One because we believe Formula One will help us to grow,” said Gianluca Di Tondo, senior director of marketing at Heineken. “Contrary to the other brands, we have a strong commitment and investment we are putting behind this. When you talk about 10 percent of your global media budget, you are talking about serious money.”

One of the bottom teams, Sauber, along with Force India, filed a complaint to the European Union over how Formula One distributes the nearly $1 billion it receives annually from all of its deals.

Just over 60 percent goes to 10 of the 11 teams, with the rest going to CVC Capital Partners, the majority owner, and to Bernie Ecclestone, the circuit’s promoter and a minority owner.

The Heineken deal last week also raised the question of the top teams’ financial arrangements with Ecclestone. The current contracts run through 2020.

“It’s still some way away,” Christian Horner, the director of the Red Bull team, said. “But I would envisage that talks would start over the next 12 months or so — or 24 months — but impossible really to predict.”

An initial contract in 1981 laid out the financial terms among the teams, Ecclestone and the International Automobile Federation, the ruling body of the sport. Terms have been renewed or renegotiated every five to seven years.

The first three decades of the deals set up a solid financial base for the teams as they all competed under the same deal.

But car manufacturers and “legacy” teams pressed for changes in the last negotiations in 2013, when Ecclestone decided to sign individual deals with teams, rather than a blanket deal with them all. It guaranteed the top teams would continue participating, but much to the detriment of the rest.

Today, even among the top teams, financial success does not correspond directly with success on the track. Mercedes does not receive as much money as Ferrari, the Italian team that has been around since Formula One’s start in 1950 and that receives $70 million a year because of that legacy. Ferrari’s special payment just for taking part is more than the total earnings of all of the bottom five teams in last year’s standings.

The full payments from the Formula One promoter to the teams is done through a complicated system linked to how they finished the previous few seasons, along with the separate deals for certain teams based on their importance to the series.

According to figures published last Tuesday by Autosport magazine, Ferrari earns $192 million a season, compared with $171 million for Mercedes, $144 million for Red Bull and $87 million for Williams. Manor, the bottom team, earns $47 million. New teams, or those that finish outside the top 10, receive no money for that season. Manor currently is in last place, in 11th.

Haas, the first American team in decades, joined as the 11th team in Formula One this season, so it is ineligible for a payout.

“Next time we will be involved,” Günther Steiner, the director of the Haas team, said of the negotiations. “This time we knew what we were going into. So we cannot be happy or unhappy: We took the fact it is what it is, because other people negotiated — but next time we will play a part in it and voice our opinion.”

But with the top teams having annual racing budgets of more than $250 million — the rest comes from their sponsors — and the bottom teams spending less than $100 million, the disparity is striking, and the smaller teams complain that they cannot compete.

“The difference between the front teams and the back teams is too big,” said the Dave Ryan, the racing director of the Manor team, which finished last on Sunday, two laps behind Hamilton. “I do believe the leading teams should get more money, but I think the gap is just massive at the moment and it needs to be looked at in a slightly different manner.”

Robert Fernley, the director of the Force India team, which is having financial difficulties and relying largely on its billionaire owner, Vijay Mallya, for its survival, agreed.

“I would like to think the commercial rights holder this time does it in a more transparent way,” Fernley said, adding a comparison to English soccer. “The Premier League is a perfect example of where you’ve got a performance-related program that’s very fair and transparent. There’s no need for negotiations: we’ve got a pot of money that needs to be done; split it in a proper manner; make it transparent. Teams take it or leave it.”